Social Securty fixitations
My goal here is to outline an approach to re-forming Social Security that would substantially alleviate Billy Beck's heartburn over the moral question of whether the system should exist in the first place. Note that this new system would be appealing to workers, but not mandatory.
Here goes:
Bush's implied plan, to allow younger workers to "privately" invest part of their FICA payments, is too tame.
A financial safety net for retirees is a desirable public policy goal, but it's probably foolish to mix the old Social Security system with a new one so that their collision makes a sour mash of both.
Separate the two by making this deal: if a worker and/or employer contributes 10 percent of income to a retirement investment of suitable risk, the worker can, for an additional 2.5 percent of income, buy into an insurance program that will guarantee that the worker will be made whole for the current basic social security payout (as normally adjusted). In other words, if the basic private investment underperforms to the extent that the return is less than the basic SS payment, the insurance will kick in for the difference. This shouldn't happen that often, but it relieves the anxiety inherent to any such system.
What to do about the liabilities of the current system? Bite the bullet and buy them out, as recommended by Milton Friedman (about six years ago in a New York Times op-ed). The current system dug the hole and the hole has to be filled, but why do that at the expense of having the new system straddling the fence? Fund the buyout from general revenue or start selling off the federal government's vast land holdings in the western states to create a "sinking fund. "(This will also benefit those states by putting these lands onto state property tax rolls.)
See Alexander Hamilton on how to make such debt into assets.
By this method you make a clean break with the old system, which keeps retirees poor while filching the investment capital of current workers. You provide an opportunity for substantial heritable wealth to future retirees. And you insure them against the underperformance of their portfolios.
This is the real way to get to a real ownership society, where anyone has a shot at a piece of an economy that's likely to triple in size, at least, by the time younger workers retire.
The liabilities of the current system will begin to look less and less enormous, and buying out those liabilities outside of the new system will look less and less burdensome as time goes on.
Here goes:
Bush's implied plan, to allow younger workers to "privately" invest part of their FICA payments, is too tame.
A financial safety net for retirees is a desirable public policy goal, but it's probably foolish to mix the old Social Security system with a new one so that their collision makes a sour mash of both.
Separate the two by making this deal: if a worker and/or employer contributes 10 percent of income to a retirement investment of suitable risk, the worker can, for an additional 2.5 percent of income, buy into an insurance program that will guarantee that the worker will be made whole for the current basic social security payout (as normally adjusted). In other words, if the basic private investment underperforms to the extent that the return is less than the basic SS payment, the insurance will kick in for the difference. This shouldn't happen that often, but it relieves the anxiety inherent to any such system.
What to do about the liabilities of the current system? Bite the bullet and buy them out, as recommended by Milton Friedman (about six years ago in a New York Times op-ed). The current system dug the hole and the hole has to be filled, but why do that at the expense of having the new system straddling the fence? Fund the buyout from general revenue or start selling off the federal government's vast land holdings in the western states to create a "sinking fund. "(This will also benefit those states by putting these lands onto state property tax rolls.)
See Alexander Hamilton on how to make such debt into assets.
By this method you make a clean break with the old system, which keeps retirees poor while filching the investment capital of current workers. You provide an opportunity for substantial heritable wealth to future retirees. And you insure them against the underperformance of their portfolios.
This is the real way to get to a real ownership society, where anyone has a shot at a piece of an economy that's likely to triple in size, at least, by the time younger workers retire.
The liabilities of the current system will begin to look less and less enormous, and buying out those liabilities outside of the new system will look less and less burdensome as time goes on.
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